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What is a Cash Advance Loan?


A cash advance loan is a loan, more often than not, issued and handed out by a person’s credit card lender against their existing line of credit. These are short-term loans that can provide sometimes fast access to cash, which can be helpful in some circumstances, particularly in times of financial crisis and emergencies. However, it is important to note that these types of loans will usually have higher than normal interest rates. 

Finding cash advance loans can be a great way to find a short term loan, much like you would a payday loan when you find yourself needing to borrow money online or otherwise. These loans are not for everyone, but by getting an advance before your payday, you may be able to keep yourself afloat and out of debt.

What is the Difference Between Payday Loans and Cash Advance Loans?

There are some similarities between payday loans and cash advance loans, such as offering fast cash to people often requiring cash for an emergency situation that is required to be repaid in a very short period or at the arrival of their next paycheck. Payday loans have been decreasing in recent years, giving an advance in cash advance loans, especially with cash advance loan apps appearing in the market. 

Often, lenders that offer payday options will also be able to assist borrowers with cash advance options, as the two loan types are sometimes not too dissimilar from one another. You should always remember though that there are a number of factors that will help determine how much a lender will be willing to lend you, if at all. These include things like your credit score, whether you have a checking account and a fixed address.

Payday loans were originally designed to help people needing usually up to around $1000 or potentially a little more in between paydays. For example, it is not common to be caught short in between paychecks. It may be the case that a particularly large bill comes in or perhaps something like an emergency car repair is needed and you just don’t have the cash to pay for it. In these cases, payday loans have traditionally been a very worthwhile option.

Cash advances were originally designed to take account of similar circumstances, and were designed for people that needed an advance on their paycheck, perhaps in anticipation of something rather than as a reactionary loan product.

Are Cash Advance Loans Legal in The US?

Cash advances or sometimes otherwise referred to as payday loans are legal in the USA, however, this is not universally accepted as each state has the right to decide the legality of them.

According to the National Conference of State Legislation (NCSL), there are currently sixteen states and the District of Columbia that have completely outlawed these types of loans.  As of 2022, there are 31 states that allow high-cost short term lending (HCSTL) without any caps which is one of the strong points why many people fall into a debt trap. States like Texas, Colorado, California, Florida and more all allow payday lending and thus, cash advance options, within state laws and regulations.

What Types of Cash Advance Loans Exist?

The most common type of cash advance loan is where cash is taken out against a credit card limit, however, this is not the only type. Here we have listed some of the other types of cash advance loans and there are various other ways you may be able to access a cash advance loan or credit facility.

In the case of getting a cash advance on your credit card, you may be able to get a cash advance from your credit account. You can either head to an ATM, so long as you have your credit card and PIN number, pick up a convenience check or go to your local branch and make the request in person. The amount you will be approved for depends on the cap that is on the credit account as well as things like your credit score.  

What Are The Benefits of a Credit Card Cash Advance?

The clear potential benefit of getting a cash advance from an already-existing credit card is that the application process is extremely simple as the line of credit already exists, being useful in certain situations life can throw at you. Furthermore, you will likely have some form of contact or record with your credit card provider and therefore, they may well be more willing to lend you money at a better rate than a payday loan or other short term loan could.

What Should I Know Before Getting a Credit Card Cash Advance?

Although a credit card cash advance can be tremendously useful for people stuck in a financial emergency, it is crucial to be aware of the terms and conditions that accompany the loan, as the interest rate is often higher than that of your regular credit card transactions. Furthermore, the interest will immediately start accumulating from the moment the loan has been approved, so the faster it is repaid, the better. 

Payday Loans for a Cash Advance

A payday loan is a type of short-term loan that, as the name suggests, aligns with your paycheck and is often expected to be repaid at the time of your next payday. This type of loan often has a straightforward application process and is more widely accepted than other loans, such as to people with bad credit. 

Similarly to a cash advance from a credit card, it gives people access to fast cash and, as mentioned above, allows a more broad audience to access emergency finance. Payday loans can be applied for with a range of different lenders, such as online lenders, giving flexibility and sometimes almost immediate acceptance, as they often do not do extensive background checks into a person’s credit history.

What Should I Know Before Getting a Cash Advance Loan?

You should always be well-informed before taking out any loan, be it a cash advance loan or any other type of short-term loans as they are often accompanied by high-interest rates and short repayment periods. This can cause financial turmoil for some people if they require more time to repay the loan, resulting in trapping people in a financial debt cycle. You should always consider the following:

  1. Will I be able to afford the loan I am applying for?
  2. What are the alternatives to a cash advance loan?
  3. Am I applying for an amount that I realistically need?
  4. Can I find the money I need somewhere else, for example by utilizing savings?
  5. Can friends and family help me get the money I need?

Alternatives to a Cash Advance Loan

If you find yourself in a real financial emergency and don’t want to take out a cash advance, there are a few alternatives, which will in turn limit your chances of being hit with unwanted added fees or in the worst-case scenario, fall into a debt cycle. The first option is to ask relatives or close friends if they can help you, however, for some, this option might not be feasible, so another option is to get another personal loan that may be more suited to your specific need at the time. Personal loans should also be carefully considered, as they, like cash advance loan options come with additional fees and higher interest rates that a credit card or high street loan.